J-0 11, 1949 

: 

Hon. ,J. Y. Felkner Opinion Noo, V-842. 

Banking Conanisrloner 

Au&In, Texas Re: Eligibility of the 

State Traemaror te 

not es.tl=u8teo~f'er 

mm: H.I., Be&son i corporetion ieauDoputj Sealking lag seallritlrr llndw 

CQ~SShXWP titiole 1524a(v.C.S.). 

Conritrwtloa o$ a 

proposed trust dgrrsmmt,~.end epplioebll* 

ity of Artlola 696 

(V4.S.). 

Deer sir: 

mu hero rsquestod the reoonsldaretion of 

Opinion Ho. V-483 by this office. Pour original raquoat is res&hd a8 follour: 

"The Sem liouaton Ihiderwriters, Incr 

OS Hou8ton, Texas la.8 dan*stlo serporatioh hevlng &am granted a oherter by the 

Saorrt~ of State on July 3, 1947, with 

Sub-So&Ion 49 of Artlale 1302, Revised 

Civil sptutas or Tixe.8, &I its purpoas 

OhlaB Ui, bJ +irtUo of anid ~oWVZ%, it 

la under the gdnoral aupsmielon of this 

Bapertment pn aaoordaaor with the provia16~ of Artiols,1624a, Rerlaod Civil. 

Statutes of Tans. 

Q@ld c¶tion now propores to 

lssue.end soil to the conoral puUo a 

Siftren-tmr Maturity undwwritor~ Bond 

sub oOt ta the proVlslon8 of Emotion 7 

of i rtlolb 2524ao, Rsvised.Cltll Stetutas 

of Teum, whhhprovldm for oelletorelieetlo*..,ti La1 o&steadl~ bomPs,.akoter, 

cartiiioatsa; daInntur~s ~a@ @iabr eblii 

getionl$ 8vla l.m Trus by ~~0ur1t1.8 of tlro 

reesmebls urket relue equeling et leest 

at l ll tinba tho faae value of suoh obllgetions, which amuritiis ahell ba pleood 
.’ . 

. 

. 

Hon. J. 88. Folkimr - Pees 2 (V-842) 

ln.t,he hands of e oorpOr0tiOn h0vi 

f’s3 

trust 

powvrs opprovod by the IkanLrlny C rrloaer 

of Texas, as Trustee, under e trust egrosmoat or at the option of eny such oar 

tltin whloh sells in Texes-such vbll$e I?-- loss 

es heretofora referred to, such aorpvretloki 

mey, upon applicetlon to end epprotel brr the 

fi?ii%a 

ccwl8sionor, deposit aoourlt%vr 

8tatv Trvasursr of T&x&s m&r a 

trust e@sammnt la llou of auoh d-apelta 

with e Truotev as set forth hsrelPabvva, 

Ns~bJeot Cvrpvretlon hea Ouhrittod for 

the Coml~~Ionbr~a epprora& its tmut ipba- 

-0-y thb Wets 'Treeaurrr *a Timtea, 

tvgvtherrtit 0 speoiran of the bvnll fobligatloa rhfall It propo8va to abll. lo vaolvar'sa~4 IfWmiwnta aad, in ooanwliian 

tkarvvltht t&w fvllvwlng questions erv l ub i 

mlt#d fvrm oplnivns 

: "lo h ths torma end condkons vi 

thv t&M ~onturv vuch as to rerreat'tho 

approtel thmvof by tha B Cvmlaaivner? 

: ., 

"2* wouu the St&t; Treeeurer., 

7 

tlr- ' 

tam OS his crfflalal oepeoity, bo &l&1 I.8 to 

rot u T&uatU.p*ll)r the tirma vi th6 l nb dttee ttiut La dvh-tur a ? 

"30 Ia the proposed bond oo~,idmM to 

be ln..la$el Svma ed doa? It oou WOhim tko 

claaa vi inatoracl&# or &I. at&ma atvatloaod $.n JtitivW'? vi Artlok 1241; 4 Il~~Sao~ 

civil 8tatMva vi 2 x08? .If so, .wvald tha 

pr+la,ivaa,bf'A&lo(l6 BM,.hvvlaed Civil 

St0tutcis of TeXU, ala0 applft” 

Yvu have aLao raqmat W up~a mom&d- 

*r&ion ths bond rvferrsd tv so 1)eld by the 8U 

Svuitam ~ndvrwr%tvra, lgw,;lo 

m@.P 

"g 

ovlletorelit*tlvn, m 

o vf obli~etlcm . 

a6 to the eromtr 

far whlo oaoh bond la TV bv ool;l.rtsrgl~aed~ 

FOP th0 p\rrpoae of thlr B#,$.@ba, queatlona (1) 

end (2) am QlaaurseQ 0ad enawanwe th@thvr, 

Tbo psrtimant rovlaiona of 8vatilon 7 of &t-l010 1624e,,Varnom~a Clri E ntetutr a , l pv as ~ollvwar 
Hon. J. I(. Falkner - Page 3 (V-842) 

"All bonds, notes, aortifioetes, debonturas, or athe+ vbllgetlons sold In Texas by 

my corporation effeated by a provlsZon of 

this &et shall bd scoured by securities of' 

the reasonable market value, equaling at least 

et ell tiaeo the Sam value of such bonds, 

notes, oortlSlaetea, debentures or other obllgetlons. IS such aorporatlon sells in Texas, 

bonds, notes, osrtlSloetss, dsbentures,.,or 

other obligations upon which it receives lnstallaent paJluntsp auoh bondag noteso cei%lTloates, deb@ntuIWs ana other obligations 

shall be mowed at all tlmea by seourltles 

having the reasonable market value equal to 

the wlthdi5awLl or oauosllatlou value of such 

obligatlcms outstsndiag,, Said ssourltles 

shall be.&laCmd.Lu the h@ds of a eorporatlon 

brii~lng.trust powera approved by the Banking 

Conpnlssiotaer ofTexas.as Trustes under e trust 

agree&&t, the terms of which shall be opproved In writIn&-.hy. tbe...Banklngnp~ssloaer vi 

Taxes, or et the option .oS any lrach oorporatlon wh.&h sells In Texea* bonds, notes, oertifioetes, debentures, or other obligations 

upon which it receives instel&f@ pag*lents, 

such corporation may upon appllaat$otl t@,.and 

approval by, the Banking C~asiotier of 

Texas deposit-securitiax having a reas&abIe 

market value equal to the withdrawal or cenoellatlon value of such obligations outstanding with the State Treasurer of Texas in lieu 

of such depositir With e Trustee as set forth 

heroinabove, o Q on (Enlphesis supplied,.) 

The underwriter*s bond issued by the ~QPI 

Houston Underwriters, Inc., la what ia kuoWn as a asingle-payment "type of bond or obligation iu that the entire consideration for the sale thereof is payeble at 

the time of its delivery, 'end therefore is not the tVpe 

of bond referred to in Sac, 7 upon which the Issuer reoelves a consideration lln installment paylllenta+" 

Under the pro&Ions of Section ?‘ab& quoted It is mandator g that the collateral securing the Underwriters Bonds be placed In the hauds of a corporation having trust powers approved by the Banking Commissloner of Texas as Trustee under a trust agreemesit, the 

tams of which shall be ep~reved in wrltlngby the Banking c~ssloner of Texas, end the State Treasurer in 

: 
Non 3’. !:. F!nI.knur _ I’afsQ 4 (V-842) 

his Sficlal aepacity would not be eligible to aot as 

Truetee, If tbo.Und4rwritsrs~Bon~s in qu4sti4zl VW4 

#old upon tho’installmont @RA, tlieA at tb4 4ptiCm of 

the 3an1 &lUSt7OA Fnd4I'Ur~tOlW, IIIO., .tb4 d4 pet ot’ the 

collitsra3. aeour~ti4s could be.mads with t”b,@ats 

Treaaur4.r in the:manner and form provided @r Jjsbtlan 

.7, ,b@ since the Underwriters ,Bonds in question are 

not being sold upoAth ins 

-~%3ing14-paym6nCn plan, it is 

tloh.ha irW;...~yugt.~powrs, ap 

'miaglich ~P'tii:d:'~iigt44 bc 

*g. 

@pp 

dltfom W :t+ tjlpst .$ndelItur 

tcate@~:Uptiti the ii~@+d2.l~y 0 

act.as Trustee, $0 no+ WtWd 

Odmiesimaer 

29 ary t;heref 

.a14 
Hon. J. M. FaUmr - Page 6 (V-842) 

Houston Undorwritore, Inc., shrll be swmrod by 444witiee of th4 r4asenable marl& valme equal* et 14ast 

at all timoa the face value of suah bon&--or other oblIRetI4As. Under the express pmwiaions of th4,bond 

ia qu4stioA, the isstur, 9u EoulltOA mdorwrit4rs, IAN., 

is obligatsd to pay to the bondholdsr flft44n ywrs 

from the date of the bond the mm of )l,OOO.OO or mw4, 

whleh shall oonsist of (A) $750.OO'In oash; (B) 25 fully ~Id~AOA-as8lOstiablO shar.8 Of the capital stock of 

Sam Houston Undmrw&itetis, IPC., valuod,$or the purpode 

of the bond at #2SO.O0; and 

as may acoru4 to the bondho i 

(C) such annual bwuwoa 

iOASi of t&.bond. 

d4r undrr the other proviaThe oompanj further obll 

8 

atra 1tsel.f 

wIthIn thirty day8 rrata tha data.of.th.4 bon tq dellvor 

to the bondholder the 26 rharws of staak r4farMd to 'iA 

(B) aboro,'md further obllgatos itself at my t3.m after the 4~d 0r ths first y4rr,frn the'date oi the bond 

or at the end of an) suoooedlng year thdroefterc) to par 

to tha bondholdar the 4ash aurrendm valu4 themof aa 

s4t'fOrth IA the table On page 3 of the bond, both of 

uhich obligations uw dlreot obligations of th4 iaauor. 

‘fh4 issuer has'& direct obligation to perfomi 

all of the oond~tia~~Imp4sod upon It adsr the terms of 

the %tdoiwrltem% Bonds aAd upon Its fail- to,pez'fm 

e of swh obl&b9ilmse..%ha .Lammr.would b4 subject t0 

a judgment ior the ~poriflo performem o OS suakt obllgw 

tione Or in. lima theroof$ &Ad'-iA the OrOAt of its in+bility to perlorm Its obliglition, to,doliror tlu 8herW of 

stook in qAaatirn,' it roald ba lIabl4 ir &nag@8 for the 

noAperf4rmaA4 of such abll'grtI4A.. 

Howe94r, that prrt of ths UAdOrWrit4rs Bond 

(B) which provides for the twenty-five (25) fully paid 

nanars4ssable ahares of capital stook of th4 aomp 

hmein valued at Two Hum&?ed Fifty Dollars ($260*OO Is 

not aA "other (diMat.) 4buatioA rlthin thg.neaning 

of Sootion 7, Art1414 1524a, which would require Its 

oollatoralisatlon therounder. The toti "other obligationen as ue4d IA Artlolo 1624a means direct 

4blIgatiOAs of the lesu~$ ay*bX4 in fixed 

a8 bonds, notea, &4aw.fim L b *ad ,dclbentulwr. 8.4 Oman 

corpI v. lau. BOO% CO.~, 177 ~18, 49, 187 IT& 606 Tmd, 

It Is th4I'Of&We the OpiAiOA of this offi, that 

. . 

the bond in question Is such a bond or other obligatloa 

of the Sam Houston Undsruritera, Inc., whloh Is roqulred 

to be collaterallse~ under the provisions of SOOtiOA'7~ 

&-?ticle 1524a, V.C.S.; and the faglure to col3.at4ral~t4 

tlloao bonds by~tha issum b4forr offer- them for dale 

or selling then would subj.4at tti comppny to tha patiOIt 
Hon. J.. M. Palkner - rage 6 (V-642) 

Preeoribed In tho la& paragraph of: motion 7, whloh 

would bo tho forfeiture of Its ohartor and a receivership at the suit of the Attorney General brought at 

iy;;;geet of the Bankl~ CommIssloner of the State 

* 

The Undorwrltorr Bond oontaine the tollowing 

provialon at the bettor of page 1: 

“An amount oqud to ‘or In ucoin of 

the Guaranteed Cash Surrender Voluo. of this 

Bond shall be invested tn United Stat08 

Government Bonds, First.xortgago Loans on 

real estate situated in the Stat0 ol Toxae 

.and/or other eeourltlas whioh ar*'qualifIed 

inverrtmont for the Capital Stoats, Surplus 

and Ramlive funds of an Old Line Legal ReBOFVO Life Insurance Compan~.aud $bo.sa$d 

aeourltlss shall be deposited in Trust with 

the Treasurer of the State af bxea.as ro-. 

&r~dkgT~sBj~ Cotiaslollei' of tho 

or the bonoflt of tho Bondholderso The sosurltlos heroin referrid to 

shall at all times have a roraonablo arrket 

value equal to the maratood ea@h value of 

this rmd.al.1 other Binida of this clam outstand~o" 

thus c&ljIng~wIth tho pFovIsIon of so&ion 7 last 

above quotod requiring a doflnlto dosorlptlon of tho 

oharaotor of aollatoral roourlng tho pryaont of mob 

.' obligation. 

The proposod underwritor*n: bond ir In legal 

form and OQOI uithin the class of Iastrmnonta or obllo 

gatlons mentioned In Seetlon 7 of Article 1524a, R.C.S, 

of Texaco, and rhou&d be oollatqralicad in aooordanco 

with thei provlsto~baf Saetlon 7 for oollat6ralIzation 

of a ueIngle~pa~tn bond or othor obligation. Sin00 

the underwrltercr Bond la #old upon the "rlwl~- 

plan and not upon the *partIrbpayMnt or Inrt 

plan," tho provlaiona OS AFtIolo 696, Tit10 21, Revised 

ClvIl.Statutoa, arr not applicable. . 

Sinoo it Is tho oplnlon of this ofilcw that 

the Undorwrltsra Bond rororrod to 1s the trpe of ablI#atlon roquirlng ool.latoralleatIon as a *rlngle-payment 

bond or obligation, you requort our opinion ab td tho 

amount for which said boqd I* to be oollatorallred. 
r 

Hon. J. Y. Falkn9r - ?ago 7 (V-&i2) 

. 

while the free of thr. bon@ 

for tho paymotit to tha bondhol0m b$ t 

rlmarll~ call8 

hd irruer of the 

~sum of $l,OOO.OO or awe at the explratlozi of 15 year8 

from date theroof, qevertholescl, upon the delivery to 

tho.boudholder of. the 25 8,bnrelr of th9 capital stock 

'.of the company at tb8 rgrood valuation 9f $260.00, that 

part of the obllgrtlon of the 188~6~ ha9 been dlsoharged, whIoh leaves the obllgatlon of th9 %rruer In full 

force and effeot to py &t mhturitp ,#ta the 8um of 

@O.OO In cash, the Guaranteed l&tii&y Value,' plu8 

any bonuses rooeIre&undop olauso fc), which are of no 

fixed amount and may posalbly be of no amount at all* 

The tcras of the bond a180 0411 for the pawest to the 

bondho&iier of o9rtaj.n &umo lieted under the guaranteed 

ohah #mrrender Valw 

l y9ntuaUt1.r~ 

QlLphgS 3 6f the bond upon oortaln 

mnoad-th9 n$ao6 yalu& of $ho Unde~Itq,$a Bond 

which nuet be SrpOrbd #t all tIaies b 

reasonable mark9t orLu9 theroef U$ $ $ 

qMuFltlo8 of the 

9 

e@,+@; .9&d tho laankCa8nel88io~ of Texas should rrqU%r9 +$%a% surk under9r tbr*s bond b9 ool~@taralIeed by ti9 (196ait with tho 

Trurtee of ruoh reo~itlos a8 may W9 r;j$$i+med by hIa which 

have a roaecnrble qll?ket valuo oquiNkot tr t&at U(cunt, 

overruled. 

opinion Ho. V-483, approvd 

!i!Qlw 

The Stbto Troasuror of Poxha I8 not oll- 

&lb19 to act a9 Truatloe Sor a odn;r)rorat.lon ire 

s~bondu or ot&or obligaticum'undm tll9 

provlalens 6f brt. lS24r, V,U.S., Wbloh ara. 

. 
Eon. J. H, Falknor - Pa&O 8 (v-842) 

cm :wb 

c, Ke Rlahard8. 

A88htut